Reflections on the Exceptional Treatment of Agriculture in the WTO

Abstract

The GATT gave special treatment to agriculture by allowing quantitative import restrictions when domestic output was also controlled, and made an exception to the ban on export subsidies by allowing them for primary products, subject to somewhat weak and imprecise conditions. Both were concessions to the operation of domestic farm policies in developed countries, primarily the US and the UK and later Canada and the EU, and full advantage was taken of these legal exceptions. Subsidies in general had been treated leniently in the GATT with merely the obligation to notify if they impacted upon exports. Domestic subsidies for agricultural products had significant impacts on both imports and exports and were seen to be a significant part of the trade problem, but operated under minimal constraints. So the exceptional treatment of agriculture in the GATT had led to a dysfunctional trade regime. The Uruguay Round faced up to the inchoate conditions on world markets and the deterioration of trade relations that these exclusions allowed. The Agreement on Agriculture (URAA) specifically banned quantitative restrictions on imports, except those introduced to guarantee access and banned new export subsidies, capping and reducing existing expenditures on the programs and the volumes that could be subsidized. Domestic subsidies that were deemed to be most trade-distorting were capped and modestly reduced. The Doha Round would, if completed, eliminate export subsidies, severely limit the ability to provide trade-distorting support, and reduce the bound tariffs by a considerable extent. The URAA was negotiated at a time when the US and the EU were the main players in the agricultural policy space and it represented a way of disciplining trade to avoid conflicts and reduce protection. Domestic policies were reformed in a way that was consistent with the URAA constraints. If the Doha Round is successful, most of the special provisions for agriculture will no longer be needed. But at that stage the URAA may inadvertently hamper the process of developing trade rules that meet new challenges.